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Barclaycard report shows subdued growth in consumer spending in April

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Consumer spending suffered a second successive weak month of growth in April, rising just 1.9 per cent year-on-year as economic headwinds – including slowing wage growth, flat-lining employment rates and uncertainty about the EU referendum – continued to weigh on confidence.

While April’s growth is a slight uptick on March’s 1.6 per cent, it continues the weaker performance seen since the start of the year, with growth having fallen from 4% in December. The findings emerged in the latest monthly data from Barclaycard, which processes nearly half of all credit and debit card transactions in the UK.

Faced with a basket of macro-economic challenges, consumers reined back their spending in April to leave it just ahead of the latest RPI figure of 1.6 per cent, and falling well short of the 12-month rolling average for spending growth of 3.7 per cent.

In an effort to stretch their budgets, shoppers cut back spending on essentials – impacting supermarkets most, with the category shrinking 6.1 per cent, the worst performance since Barclaycard records began in 2011. Clothing saw a similarly sharp fall as a delay in the arrival of spring deterred shoppers from updating their wardrobes. Spending on clothing fell 3.5 per cent – the worst performance in three years.

Consumers put some of what they saved in these areas into discretionary spending, with air travel up by 6.5 per cent as people looked ahead to their summer holiday, and restaurants maintaining double-digit growth (11.3 per cent) as consumers prioritised leisure time with family and friends.

These strong performances helped push up overall travel spend by 5.9 per cent and overall entertainment spending by 9.0 per cent, making them the best-performing major spending categories that Barclaycard monitors.

The general trend remains one of flagging consumer confidence, however, in line with figures first recorded in February that showed a sharp drop from 2015 levels. Just over a third (35 per cent) of those asked say they are confident in the strength of the UK economy, notably lower than the 2015 average of 45 per cent.

With the three-year boom in employment growth starting to flatline and worries about stagnating wage growth, only 57 per cent feel confident in their household finances, down from the 2015 average of 71 per cent.

Consequently, just 12 per cent say they are planning to spend more on luxuries and treats for themselves and their families, compared to 37 per cent who disagree with the statement.

Paul Lockstone, Managing Director at Barclaycard said:

“April proved another challenging month for retail as consumers held back in the face of economic headwinds. The feel-good factor they enjoyed in 2015, encouraged by rising employment and increasing household incomes, has been hit by a combination of uncertainty on everything from oil prices to the EU referendum.

“Spending on leisure, travel and entertainment proved to be more robust as consumers protected spending on experiences by cutting back on essentials, which is a pattern we’ve seen for a few months now. However with this producing diminishing returns, the wider economic picture will need to improve if we are to see consumers return to the level of spending growth we saw last year.”

Source : Barclaycard Press Release

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10 May 2016

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